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So you are saying that this sort of stuff wasn't rife | 130 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Catch 22 for Homeowners
Authored by: Anonymous on Saturday, January 05 2013 @ 03:10 PM EST
The government played a part by insisting for years that lenders loosen lending standards to allow more "non-traditional" borrowers.

The common view of it from Canada at the time was that Americans were in some sort of insane speculative frenzy, all counting on having sold the house or the mortgage to some other sucker before the music stopped. Mortgage lenders needed no prompting from the government to lend unrealistic sums of money to dubious parties as they were making a killing on commissions. When it all ultimately went sour, well it wasn't their money they were lending out, was it? The money belonged to the shareholders, the depositors, and ultimately, the taxpayers. So, to the managers it was like buying a lottery ticket. The only risk to them was not getting a massive bonus.

The financial crisis in Europe in Greece, Spain, Portugal, and Ireland has similar roots. Deregulated banks lent money on speculative property investments. When the bubble finally popped it took the economies of those countries down with it. Spain by the way, had the lowest government debt of any major OECD country (65% of GDP, versus more than %100 for the US), but that didn't help them when the banks collapsed and needed more bailout money than the Spanish government can scrape together.

The reason that Canada didn't get sucked into the frenzy was due to the political circumstances at the time which made bank deregulation political suicide for the government of the day. This was due to popular distrust of banks, and nothing to do with financial foresight. The current party in power was in opposition at the time and they were in favour of all the things which later proved disastrous elsewhere. This hasn't stopped them however from parading on the world stage and congratulating themselves on their foresight.

[ Reply to This | Parent | # ]

So you are saying that this sort of stuff wasn't rife
Authored by: Anonymous on Saturday, January 05 2013 @ 04:01 PM EST

Because I know some people who got hit by it, and they weren't the sort of
people to be playing games with their finances.

It's rather like rape - easier to blame the victims than make everyone act
morally.

Wayne
http://madhatter.ca

[ Reply to This | Parent | # ]

Who is responsible?
Authored by: artp on Saturday, January 05 2013 @ 04:26 PM EST
You are right that the defaulted loans were a problem
because the mortgagees had not made payments. That does not
exonerate the banks, though, who were the ones who created
the mortgage bubble in the first place. Both parties have to
take responsibility for what happened. Individual homeowners
did not create the whole problem.

I only have to look back to the 80s, when the farm land
price bubble burst. The banks had urged farmers to buy more
land because corn prices were going up. They could always
make the payments with grain prices the way they were.
Except everybody got carried away. The banks have the
biggest - but not the only - responsibility for this.
Without their complicity, the bubble would not have existed
and would not have burst. They were the prime movers.

I note that the mortgage crisis did not affect rural banks
much on this bubble. Perhaps they learned something from the
last go-around. But it is probably because it happened in a
playground that they did not frequent. Rural banks make
business loans on farmland. Any home mortgages are
immediately sold off to a third party. And thus starts the
"game".

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | Parent | # ]

Catch 22 for Homeowners
Authored by: jjs on Saturday, January 05 2013 @ 09:27 PM EST
>The government played a part by insisting for years that
lenders loosen lending standards to allow more "non-
traditional" borrowers.

No, that did NOT happen. 80% of the defaulted loans were
given by financial institutions NOT subject to the law in
question. Nor did the law require loosening of the lending
standards. It merely prohibited banks under FDIC from using
location ALONE as a criteria (red-lining). In fact, it
specifically stated that banks were required to maintain
loan standards. nor do people in inner cities take out $1
million mortgages on beachfront property.

While certainly people got greedy, so did many banks and
financial institutions, who were being pushed by their
investors for higher returns, and housing was seen as "safe"
- because everyone knows housing only goes up ;)

---
(Note IANAL, I don't play one on TV, etc, consult a practicing attorney, etc,
etc)

[ Reply to This | Parent | # ]

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